Global Economy

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Deutsche Bank refuses clients’ demand for physical gold

Clients of Germany’s biggest bank who have invested in the exchange-traded commodity Xetra-Gold are facing problems when they want to obtain physical gold, according to German analytic website Godmode-Trader.de.

Xetra-Gold is a bond on the Deutsche Börse commodities market, and Deutsche Bank is a designated sponsor. On the website, Xetra-Gold says its clients have the right for physical delivery of gold.

“Physically backed: The issuer uses the proceeds from the issue of Xetra-Gold to purchase gold. The physical gold is held in custody for the issuer in the Frankfurt vaults of Clearstream Banking AG, a wholly-owned subsidiary of Deutsche Börse. In order to facilitate the delivery of physical gold, the issuer holds a further limited amount of gold on an unallocated weight account with Umicore AG & Co.,” says Xetra-Gold.

However, despite claims that every virtual gram of gold is backed by the same amount of physical gold, clients have been refused the precious metal upon demand.

In the US the year-on-year trend for productivity has turned negative . Most central bankers dismiss this fact as a short-term aberration. But the Japanese economy provides an example of what interest rates at or near zero can do to a large, developed economy. The answer is not much: not much real growth; not much inflation – and, together, not enough nominal GDP growth to repay historic debt should yields on sovereign debt ever return to normal.

Money Mafia/ Midweek Open Lines

Former Minister of National Defense in Canada, Honorable Paul Hellyer, updated his work researching the New World Order, the US shadow government, and the ‘Money Mafia,’ all of which he believes are at the top of the cabal that’s been running the US and much of the world since World War II. This cabal started with the Council on Foreign Relations in 1940, and later included the secretive Bilderberg Group, and the Trilateral Commission, he cited. “There’s never been anything like it…where a small group of people call the shots and the politicians are really just talking heads,” he stated. He characterized this New World Order as a diabolical and dictatorial empire.

For the cartels, there’s no future in using a military to take over a country– instead they use things like money, in which they have monopoly on its creation, said Hellyer. Through currency manipulations, debt, and ever increasing trade agreements, they transfer more and more power to the banking cartels and transnational corporations, he continued. He expressed disappointment that President Obama was peddling the Trans-Pacific Partnership, which he considers to be part of the cabal agenda.

Hellyer also spoke about the evidence for UFOs and alien visitation, which he first became acquainted with when reading Col. Corso’s book The Day After Roswell. Climate change is a real and serious issue, he said, and he believes the cabal and US military currently has the technology (Zero Point Energy) to switch over from fossil fuel to clean energy in just seven years, which could help offset the problem.

China’s New Silk Road To Make A Big Move In Gold

At 48 miles long, the Panama Canal cuts through a narrow strip of land in Central America.

It links up the Atlantic and Pacific oceans, allowing ships to pass through the landmass instead of sailing around a whole continent.

Ships pay dearly to use this shortcut… up to $375,000 for a one-way toll.

There’s only one other route between the Atlantic and Pacific oceans: a 7,872-mile journey around the tip of South America.

This trip can take weeks and cost hundreds of thousands of dollars in fuel.

The U.S. built the Panama Canal in the early 1900s. At a cost of $9 billion in today’s dollars, it was the most expensive construction project in U.S. history at the time.

So when other countries (including Germany and Japan) tried to build a second canal in nearby Nicaragua, the U.S. wouldn’t have it. A second canal, just 500 miles away, would dilute its value.

In 1912, the U.S. military even occupied Nicaragua to make sure there would be no Nicaraguan canal.

And there never was.

But that’s all about to change…

The Chinese are preparing to build a Nicaraguan Canal. Like the Panama Canal, it will be a shortcut for ships to pass through Central America.

If all goes to plan, China will finish its canal in about 10 years.

And here’s the thing…

China’s Nicaraguan Canal is just a small piece of a much larger strategy of building strategic infrastructure to bypass U.S. control.

The focal point of this strategy is a project called the “New Silk Road.” And if China has its way, the New Silk Road will help China dethrone the U.S. as the dominant world power.

The New Silk Road is the biggest story you’re not hearing about. The U.S. media has barely made a peep about it. Maybe because it’s just too big and complex to fit into soundbites…

The World’s Most Ambitious Infrastructure Project

For over a thousand years, the ancient Silk Road was the world’s most important land route. It was a main trade route for lucrative Chinese silk.

At 4,000 miles long, it passed through a chain of empires and civilizations and connected China to Europe. Merchant Marco Polo traveled to the Orient on this path.

Today, China’s New Silk Road will include high-speed rail lines, modern highways, fiber optic cables, energy pipelines, seaports, and airports. It will link the Atlantic shores of Europe with the Pacific shores of Asia. It’s history’s biggest infrastructure project.

New Silk Road Routes

Chinese President Xi Jinping announced the gigantic plan in late 2013. The Chinese government rules by consensus. They’re careful long-term planners. When they make a strategic decision of this magnitude, they’re totally committed.

Plus, the Chinese have the political will to pull it off… and the financial, technological, and physical resources to make it happen.

There’s a saying that the new national bird of China is the construction crane. I was recently in Shanghai, Hong Kong, and Macau, and I can see why. These cities are full of impressive buildings and large skyscrapers.

The plan is still in the early stages, but important pieces are already falling into place. Late last year, a train carrying containerized goods left Yiwu, China. It arrived in Madrid, Spain, 21 days later. It was the first shipment across Eurasia on the Yiwu-Madrid route, which is now the longest train route in the world. It’s one of the first components of the New Silk Road.

In short, the New Silk Road is all about building alternatives to U.S. power.

Part of that, of course, is displacing the U.S. dollar, the world’s premier currency.

So it should be no surprise that China’s New Silk Road project is about to make its first big move in the gold market.

China’s Gold, a Threat to Dollar Dominance

According to recent press reports in Asia, China’s $40 billion New Silk Road Fund is likely to make a bid for a gold mine in Kazakhstan.

The Vasilkovskoye mine is owned by Glencore, an Anglo-Swiss mining company. It produced 380,000 ounces of gold last year. The New Silk Road Fund is considering buying it for $2 billion.

This is just the beginning…

China will continue to build new infrastructure for the New Silk Road. And continue to accumulate lots more gold.

This is not good news for the U.S.

Most people don’t realize it, but if the dollar loses its status as the world’s reserve currency, the dollar would collapse. It would cause a financial hurricane of historic proportions. It would be much worse, much longer, and very different than what we saw in 2008 and 2009

Former Wall Street analyst and journalist Michael Krieger contends the recent so-called “Brexit” chaos is signaling something much bigger than coming economic trouble. Krieger explains, “I think the biggest thing with Brexit, and I think it is far bigger than an economic downturn, is the disintegration and ultimately the overthrow of the entire status quo regime, the entire post WWII establishment. That’s way bigger than an economic decline. It’s way bigger than the economic decline in 2008 and 2009. When you think about it, since 1945, we’ve had all kinds of economic declines. We’ve had bear markets and bull markets, but the status quo, the establishment, the basic principles that have been guiding the world for, let’s say 80 years now, those are what are going to be overthrown, and that is a way bigger deal than an economic downturn, in my opinion.”

On the odds of a financial crash, Krieger contends, “In my writings, when I first came out of Wall Street, I focused on debt, I focused on economics and I focused on financial markets. I did all of that stuff, but I stopped doing that for one simple reason.

It was obvious to me . . . that this thing had only one way to go, which is a complete collapse of everything. We’re going to need to start over. There’s too much debt. There’s too much corruption. There’s too much BS. There’s too much war. There’s too much everything that is bad in this world, and debt is one aspect of it. Are we going to have to wipe out the debts one way or the other? Of course, we will. I guess the reason I have stopped talking about that and writing about that is because it is so obvious. So, what I have been doing over the last three years is getting people aware and engaged on everything, not just the economics, but the political corruption. Every single industry in this world is basically hitting peak corruption, peak shadiness, peak violence and peak everything. So, it’s not just the debt or the economies that are going to collapse, it’s everything, the political establishment and the social fabric. All of these things we have been living under our entire lives will be replaced by something else. . . . The only question is, are we going to get something better or are we going to get something worse?”

Things have reached fever pitch, and the populists are fed up with the system, and ready to revolt. Technology has changed all the arrangements, and literally everything, not only in economics, but in politics, and throughout society, is about to change in a transformative way.

Refiners are shifting to yet another desperate attempt to delay the inevitable market equilibrium point by switching from summer to winter blend as demand for the former has disappointed. The problem is that by doing so early, stocks of winter blend will fill that much sooner, and absent some miraculous surge in demand in the winter months, the moment when the price of oil tumbles has merely been postponed for a few months while assuring that the drop – when it comes – will be much more acute.

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Germany’s largest lender Deutsche Bank will shut one-quarter of its branches

Deutsche Bank will close 188 branches across Germany in the coming months, with 51 of them in the North Rhine-Westphalia region.The lender has been forced to implement dramatic austerity measures after share prices plummeted by a staggering 48 per cent, marking an all-time low.It has also pulled out of 10 foreign markets, including Russia and Australia, and is poised to cut around 3,000 full-time jobs.

The bank has pulled out of 10 foreign markets and will cut 3,000 full-time jobs

It’s dead, it’s insolvent, the bank is dead

Speaking on Russia Today’s Keiser Report, he added: “The bank needs to go out of business, because they are not solvent.”But politicians, including Schaeuble, allow for financial engineering products to come onto the market that mask insolvency.

Let us take a look at what is happening in France. Here we have a wildly unpopular government staging fake terrorist attacks in order to extend martial law. The government is doing this because the Italian banking system is collapsing and will take the French banking system down with it. So, in order to distract the French people from th financial troubles they need to create a fake external enemy to unify the country around.

On the surface, things seem pretty quiet in mid-July 2016. But underneath the surface, it is a very different story. As you will see below, the conditions for a “perfect storm” are coming together very rapidly, and the rest of 2016 promises to be much more chaotic than what we have seen so far.

BREXIT-BELEAGUERED BANKSTERS BACK TO BEGGING FOR BAILOUTS!

Nothing is more shameless in a bedazzling sort of way than rich banksters standing on the public curb with their hands out. First, we had the admission this past week by a major French bank that Italian banks are so sick (and so too big to fail) they could cause systemic banking failure throughout Europe if not bailed out by over-taxed taxpayers.

Lorenzo Bini Smaghi — who was a member of the European Central Bank’s executive board and who is now Chair of French megabank Societe Generale — said the only way to save European banks, if they start to fall like dominoes due to Italy’s banking problems, is with taxpayer-funded bailouts.

Europe’s banking market faces the risk of a systemic crisis unless governments accept the idea of taxpayer money as the ultimate recourse in a crisis, Bini Smaghi said. Any intervention should be as swift as possible, he said. (Newsmax)

It’s been almost 10 years in the making, but the fate of one of Europe’s most important financial institutions appears to be sealed. But, if the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.

“When the Household survey is put on the same comparable footing as the payroll series (the payroll and population-concept adjusted number), employment fell 119,000 in June — again calling into question the veracity of the actual payroll report — and is down 517,000 through this span. The six-month trend has dipped below the zero-line and this has happened but two other times during this seven-year expansion.”

Case in point? Sweden’s largest gold and silver dealer Tavex Guld & Valuta, whose bank accounts were suddenly closed Thursday without notice by Swedish bank SEB due to ‘a general business decision’Notice posted on Tavex Guld & Valuta’s website that as of 15:30 on June 30th 2016, they can no longer accept bank deposits or transfers as SEB has shut down their accounts without notice, leaving the PM firm scrambling to set up alternate payment systems

Germany opposes any attempt to shield private bank investors from losses if Italy pushes ahead with plans to recapitalize lenders. Merkel’s government says that European Union rules on handling struggling banks should apply in any rescue effort, including forcing losses on shareholders and some creditors before public money can be injected. The government in Berlin rejects the argument that the U.K. vote to leave the EU constitutes an “exceptional circumstance.”

We Just Witnessed The Greatest One Day Global Stock Market Loss In World History

More stock market wealth was lost on Friday than on any other day in world history. As you will see below, global investors lost two trillion dollars on the day following the Brexit vote. And remember, this is on top of the trillions that global investors have already lost over the past 12 months. It is important to understand that the Brexit vote was not the beginning of a new crisis – it has simply accelerated a global financial crisis that started last year and that was already in the process of unfolding. As I noted on Friday, we have been waiting for “the next Lehman Brothers moment” that would really unleash fear and panic globally, and now we have it. The next six months should be absolutely fascinating to watch.

According to CNBC, the total amount of money lost on global stock markets on Friday surpassed anything that we had ever seen before, and that includes the darkest days of the financial crisis of 2008…

Ludwig von Mises understood that self-determination is the fundamental goal of liberty, of real liberalism. Today’s Brexit vote fired a shot heard around the world, to challenge the wisdom of the “globalism is inevitable” narrative. Ultimately, Brexit is not a referendum on trade, immigration, or the technical rules promulgated by the (awful) European Parliament. It is a referendum on nationhood, which is a step away from globalism and closer to individual self-determination.

In the fall of 2015, I said the Federal Reserve would raise interest rates once in December and then would not be able to fly any higher after that. The stock market would crash shortly after the Fed’s pulled up on the interest stick (which it did in what became the worst January in stock market history), and Fed’s hopes of recovery would fade away.

I also said that, in spite of a continually degrading economic situation around the world, the Fed would badly want to lift its interest target again in order to prove its recovery had recovered from the first lift. The fact that it would not be able to without stalling the economy completely wouldn’t mean it wouldn’t try. If it did try, however, it would find out in hindsight that any additional pull back on the stick would crash the economy into the dust of the earth.

Here we are half a year later. The collapse did not continue down as quickly as I thought it would. The stock market and oil market stabilized and recovered after January, but the US and global economy remain on a downward flight path, evidenced by falling GDP stats and rapidly declining job numbers.

The Fed certainly appears to be trapped. Fed officials have pounded the pavement to talk about their intention to raise interest rates, but every month faces additional reasons that the Fed is unable to do so.

“Don’t listen to the ruling elite,” warns former Morgan Stanley Asian Economist, Andy Xie, “the world economy is on the cusp of a prolonged period of stagnation and instability.” Xie points out that the ruling elite is blaming it on people seeing things (skeptic and fiction peddlers), and that “their strategy is to change people’s psychology.” Unfortunately for them he concludes, “the world is catching fire and that fire will eventually reach their Davos chalets.”

Gold Spikes Above $1275 On Sudden Billion Dollar Bid

As an equal opportunity information-provider, we thought it worth noting that following yesterday’s panic-selling puke in precious metals, this morning we are greeted with panic-buying as Gold and Silver spike higher on heavy volume as US stocks open…

8,500 contracts in 4 minutes – or just over a billion dollars notional paper gold bid…

Keith Neumeyer: Silver, More Rare Than the Market Understands – The Daily Coin

For the past three plus years I have been asking how silver and gold have always been available when we can see stress in the markets all through the supply chain. According to several prominent analyst, and producers, global silver and gold production declined in 2015. In Mexico alone silver production is down approximately 6%. According to some of the information that we reviewed, here at The Daily Coin, silver production increased due to the low price of silver.

Silver has become a just-in-time product. With Eric Sprott, Sprott Assets, recently announcing a $5 billion addition of physical silver to the PSLV ETF we shall see what is happening with the silver market at the institutional level.

Keith Neumeyer also explains how a large electronics manufacturer recently contacted his company, First Majestic, regarding the acquisition of silver for their manufacturing processes. This screams of a very, very tight supply of silver in large quantities. Where is metal coming from?

I sat down with Keith Neumeyer, CEO, First Majestic and Chairman, First Mining Finance, to get his take on Duestche Bank admitting to rigging the silver and gold markets and naming both HSBC and Scotia-Mocatta as being involved with the scheme. The important part is Duestche Bank naming other bullion banks as being part of the scheme.

Keith also shares with us how the gold/silver ratio is so far out balance that when it begins to correct that it will be breathtaking in the way it unfolds. Can you imagine a 8:1 gold/silver ratio price? Currently, the ratio is 75:1. Meaning the price of gold is 75 times higher than silver even thought silver is mined at a 10:1 ratio to gold.

Let’s listen to Mr. Neumeyer and allow him to explain the current condition of the market and how the mining production will continue to decline, thereby, putting quality mining operations in the drivers seat for the unfolding next leg of the precious metals bull market.

Rory Hall, Editor-in-Chief of The Daily Coin, has written over 700 articles and produced more than 200 videos about the precious metals market, economic and monetary policies as well as geopolitical events since 1987. His articles have been published by Zerohedge, SHTFPlan, Sprott Money, GoldSilver and Silver Doctors, SGTReport, just to name a few. Rory has contributed daily to SGTReport since 2012. He has interviewed experts such as Dr. Paul Craig Roberts, Dr. Marc Faber, Eric Sprott, Gerald Celente and Peter Schiff, to name but a few. Visit The Daily Coin website and The Daily Coin YouTube channels to enjoy original and some of the best economic, precious metals, geopolitical and preparedness news from around the world.

Deutsche Bank Turns on the Gold-fix Cartel

Deutsche Bank, Germany’s once-respected giant bank, has admitted being a party–together with a cartel of major Wall Street and select other international banks–in deliberately manipulating the price of gold over a period of years. As well, the German bank, in a court settlement with litigants in a US court, has agreed to name the names of other big banks involved in the criminal enterprise. As this drama unfolds in coming weeks and months, the world may well see the price of gold soar to new heights to reflect the true global market demand. This is huge.

The first time I came across evidence that select Wall Street and other major international banks, in cooperation with the Federal Reserve, were deliberately suppressing the world gold price was in the aftermath of the global stock market crash of October, 1987. That was when the Dow Jones stock index lost 23% in one day. John Crudele, an exceptionally persistent financial journalist with theN.Y.Post and John Williams of Shadow Government Statistics and an exceptional economist, informed me at the time of the gold manipulatipon reports. The reason for the fix, which then-Fed chief Alan Greenspan reportedly orchestrated, was to prevent a stampede by panicked investors out of risky stocks and bonds into gold. Had gold profited from the stock panic, it could well have been an early end to the dollar system. It worked then to prevent a gold rise.http://journal-neo.org/2016/04/19/deutsche-bank-turns-on-the-gold-fix-cartel/

Moody’s places Deutsche Bank ratings on review

Commuters pass by the front of the Bangladesh central bank building in Dhaka March 8, 2016.

A spelling mistake in an online bank transfer instruction helped prevent a nearly $1 billion heist last month involving the Bangladesh central bank and the New York Federal Reserve, banking officials said.

Unknown hackers still managed to get away with about $80 million, one of the largest known bank thefts in history.

The hackers breached Bangladesh Bank’s systems and stole its credentials for payment transfers, two senior officials at the bank said. They then bombarded the Federal Reserve Bank of New York with nearly three dozen requests to move money from the Bangladesh Bank’s account there to entities in the Philippines and Sri Lanka, the officials said.

Behind the Facade: America, The Bankrupt Hegemon

Fantasy and fairy tales can go only so far when it comes to the true condition of anything or anyone. Sooner or later the truth must out. This is very much the case when looking at the true condition of the nation the Chinese call, The Hegemon, the not-anymore-so-United States of America. The official Obama Administration economic statistics have declared to the world for more than six years that the world’s largest paper economy was in a marvelous recovery and that unemployment was a mere 5%. Now, with the most severe collapse of oil prices in 13 years, the last remaining job-creating sector of the economy, the oil and gas industry, is rapidly becoming the domino that threatens to topple a mountain of dicey credits and threaten many banks. Only this time, unlike in 2009, the Federal Reserve is in a real pickle, and the Federal debt has doubled to $18 trillion since the beginning of the financial crisis in 2007.http://journal-neo.org/2016/03/06/behind-the-facade-america-the-bankrupt-hegemon/

The Federal Reserve is a key component of the American Transfer State.Under the guise of “macroeconomic management,” it redistributes vast amounts of wealth on an ongoing basis through inflation. The victims of these transfers are ordinary Americans. The beneficiaries are the government and its elite cronies. It’s all a con, and a cheap one at that. Unfortunately, sometimes the most successful con artists are the ones who keep it simple.

Is This The Biggest Crisis In History?

Talking of Oil and Gold, last week Deutsche Bank showed a long-term graph of Oil in real adjusted terms, showing that the average real price since 1861 was $47.

Following on from that, Deutsche notes one ratio they occasionally look at is the ratio of various assets to the price of Gold…

Today we update the Oil/Gold ratio back to 1865 and find that the Gold price has just hit an all time high at around 44 times the price of Oil.

The previous high of 41 in 1892 has just been exceeded.

For perspective, the ratio was at 6.6 in June 2008 and only 12 in May 2014. The long-term average is 15.5. While this says nothing about where the ratio is going in the short-term surely this looks a good trade to exploit over the longer-term for those who care about such things.

However, as we noted recently, it merely predicts a crisis and according to the chart above it is the biggest crisis in history…

In the fall of 2015, the world descended into an economic apocalypse that will transform the globe into a single cashless society. This bold prediction is based on trends in nations all over the earth as shown in the article below.

As we enter 2016, we are only beginning to see this Epocalypse form through the fog of war. The war I’m talking about is the world war waged furiously by central banks against the Great Recession as the governments they supposedly serve fiddled while their capital burned.

The governments and banks of this world advanced rapidly toward forming cashless societies throughout 2015. The citizens of some countries are already embracing the move. In other countries, like the US, citizens fear the loss of autonomy that would come from giving governments and their designated central banks absolute monetary control.

The Epocalypse that I’ve been describing in this series will overcome that resistance during 2016 and 2017 as it wrecks economic havoc to such a degree that cash hold-outs will be ready for whatever holds the greatest promise of saving them from their collapsed monetary systems, fallen banks, deflated stocks and suffocating debt. One has only to think about how quickly and readily American citizens forfeited their constitutional civil liberties after 9/11 when George Bush and congress decreed that search warrants were not necessary if the government branded you a “terrorist.”

Submitted 12/31/2015 – 08:53

Despite such endless financial engineering, sales for the S&P 500 have been declining for the last three quarters. And profits have declined for the first time since the 2009 expansion. Simply put: The recovery is a mirage… It isn’t real… And it isn’t sustainable.

The U.S. is now experiencing the next stage of the great reset. Two pillars were put in place on top of an already existing pillar by the central banks in order to maintain a semblance of stability after the 2008 crash. This faux stability appears to have been necessary in order to allow time for the conditioning of the masses towards greater acceptance of globalist initiatives, to ensure the debt slavery of future generations through the taxation of government generated long term debts, and to allow for internationalists to safely position their own assets. The three pillars are now being systematically removed by the same central bankers.Why? They are simply ready to carry on with the next stage of the controlled demolition of the American structure as we know it.

So how do you grow household wealth by $18 trillion in the face of these dismal real world trends? In a word, with a printing press. But what happened today is that Draghi showed he is out of tricks and Yellen confessed she is out of excuses. Yes, this sucker is going down. And this time all the misguided economics professors turned central bankers in the world will be powerless to reverse the plunge.

“We live in a dystopian investment world, whose markets have morphed into an Orwellian backdrop of omnipresent government intervention and manipulation that is increasingly dictated by the quant community — who worship at the altar of prices and price momentum (and are agnostic on values).”

Christine Lagarde and the IMF Executive Board recently announced their intention to include the Chinese renminbi (RMB) in the Special Drawing Rights’ (SDR) valuation formula. This would bring the Chinese currency into an exclusive group – alongside the US dollar, the euro, the British pound and the Japanese yen – of 5 global currencies that make up the IMF’s own reserve currency.

“This is the final spasm of a dying bull market that has been entirely fueled by central bank money printing. But if you look at the underlying trends both in the domestic and in the global economy and the outlook for earnings,everything that matters is heading south and the real global recessionary forces are just getting started.”

Inside the Money Laundering Scheme That Citi Overlooked for Years

How Citigroup’s Banamex USA unit turned a blind eye on the Mexican border.

Spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before 2008!

Less than two weeks ago, when previewing the upcoming debt ceiling battle which is shaping up to be far more contentious than most expect, we said to “keep an eye on T-Bill yields for the turning point when the market decides this situation is becoming serious.”

Things officially turned serious yesterday, when as we reported, T-Bill yields spiked after the latest Jack Lew warning that the Treasury’s emergency measures would be exhausted on November 3, or in less than 2 weeks, leading to a surge in mid-November T- Bill yields

As expected, after five weeks of 0.000% high yields, today’s yield soared in sympathy with what is happening in the secondary market.

But where it became decidedly clear that while stocks continue levitating without a care in the world, the bond market is now convinced that the 2015 debt ceiling fight will be worst than both the 2011 and 2013 iterations, is in the number of bids tendered into the auction.

At just $22.4 billion, this was less than half last week’s $48.3 billion, and about 20% of the last year’s $127 billion averaged tendered bids. This plunge in demand was below even the 2013 year-end debt ceiling fight. It was, in fact, so bad that it was the lowest amount of tendered bids since October of 2006, when central planning was merely a gleam in Ben Bernanke’s eye.

The question becomes: what does the suddenly panicking – and revolting – bond market know about the debt ceiling showdown in 2 weeks that equities not only don’t, but obliviously refuse to care about?

At $267, Bitcoin has retraced the entire plunge from China’s initial devaluation entry into the currency wars and the Black Monday dump. It appears, just as we warned,that China’s increasing crackdown on its – until now lax – capital controls has spurred demand for alternate ‘currencies’ that remain out of the control (for now) of governments – like gold… and bitcoin.

There Will Be Blood

As the housing boom of the 2000’s minted new millionaires every second Tuesday. So, too, the shale oil boom minted wealth faster than McDonald’s mints new diabetics.

Estimates by the UND Center for Innovation Foundation in Grand Forks, are that the North Dakota shale oil boom was creating 2,000 millionaires per year. For instance, the average income in Montrail County has more than doubled since the boom started.

Despite the Great Recession, the oil boom resulted in enough jobs to provide North Dakota with the lowest unemployment rate in the United States. The boom has given the state of North Dakota, a state with a 2013 population of about 725,000, a billion-dollar budget surplus. North Dakota, which ranked 38th in per capita gross domestic product (GDP) in 2001, rose steadily with the Bakken boom, and now has per capita GDP 29% above the national average.

I wonder how many North Dakotans have any idea the effect low oil prices are going exert on their living standards, freshly elevated house prices, employment stats, and government revenues.

We’re all about to find out. Here is the last piece in our 5-part series by Harris Kupperman exploring what this means for the fracking industry, oil in general, and the one topic nobody is paying much attention to: the petrodollar.

Enjoy!

——————————

Date: 27 September 2015

Subject: There Will Be Blood – Part V

Starting at the end of 2014, I wrote a number of pieces detailing how QE was facilitating the production of certain real assets like oil where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that were offered on the debt. The overriding theme of these pieces was that the eventual crack-up in the energy sector would precipitate a crisis that was much larger than the great subprime crisis of last decade as waves of shale defaults would serve as the catalyst for investors to stop reaching for yield and once again try to understand what exactly they owned.

Fast forward 9 months from the last piece and most of these shale producers are mere shells of themselves. If you got out of the way—good for you. Amazingly, these companies can still find creative ways to tap the debt markets, stay alive and flood the market with oil. Eventually, most won’t make it and I believe that the ultimate global debt write-off is in the hundreds of billions of dollars—maybe even a trillion depending on which larger players stumble. That doesn’t even include the service companies or the employees who have their own consumer and mortgage debt.

I believe that shale producers are the “sub-prime” of this decade. As they vaporize hundreds of billions in investor capital, thus far, there has been a collective shrug as everyone ignores the obvious – until suddenly it begins to matter. By way of timelines, I think we are now getting to the early summer of 2008 – suddenly the smart people are beginning to realize that something is wrong. Credit spreads are the life-line of the global financial world. They’re screaming danger. I think the equity markets are about to listen.

High-yield – 10-year spread is blowing out

Then again, a few hundred billion is a rounding error in our QE world. There is a much bigger animal and no one is talking about it yet – the petrodollar.

Roughly defined, petrodollars are the dollars earned by oil exporting countries that are either spent on goods or more often tucked away in central bank war chests or sovereign wealth funds to be invested. I’ve read dozens of research reports on the topic and depending on how its calculated, this flow of capital has averaged between $500 billion and $1 trillion per year for most of the past decade. This is money that has been going into financial assets around the world – mainly in the US. This flow of reinvested capital is now effectively shut off. Since many of these countries are now running huge budget deficits, it seems only natural that if oil stays at these prices, this flow of capital will go in reverse as countries are forced to sell foreign assets to cover these deficits.

Over the past year, the carnage in the emerging markets has been severe. Barring another dose of QE, I think this carnage is about to come to the more developed world as the petrodollar flow unwinds and two decades of central bank inspired lunacy erupts.

——————————

Why Are The IMF, The UN, The BIS And Citibank All Warning That An Economic Crisis Could Be Imminent?

The warnings are getting louder. Is anybody listening? For months, I have been documenting on my website how the global financial system is absolutely primed for a crisis, and now some of the most important financial institutions in the entire world are warning about the exact same thing. For example, this week I was stunned to see that the Telegraph had published an article with the following ominous headline: “$3 trillion corporate credit crunch looms as debtors face day of reckoning, says IMF“. And actually what we are heading for would more accurately be described as a “credit freeze” or a “credit panic”, but a “credit crunch” will definitely work for now. The IMF is warning that the “dangerous over-leveraging” that we have been witnessing “threatens to unleash a wave of defaults” all across the globe…

Submitted by Tyler Durden on 09/14/2015 – 18:15Major depressions do not occur overnight. They go in downward waves, interrupted at intervals by false recovery waves. But the collapse will continue, unstoppably. Like any house of cards, once it begins to actually fall, no further Band-Aids will stop the inevitable. So, what might that trigger be?

Submitted by Tyler Durden on 09/14/2015 – 19:15On the heels of a painful S&P downgrade, Brazil now says it plans to enact some BRL26 billion in primary spending cuts for the 2016 budget on the way to achieving in a primary surplus that amounts to 0.7% of GDP.

“Time will tell who is right. But remember that we live in an era where computer trading dominates the American stock market. The “robots” that are making a lot of trading calls aren’t sitting around pondering China’s economy. They are paying attention to whether stocks fall below key levels. What are those levels? No one knows exactly. But these two metrics are worth watching. If these thresholds are crossed, both computer and human traders will consider it a game-changer point.“

The US dollar started out backed by gold and silver, then replaced to one backed by oil (hence the concept of a reserve currency). Now that backing is in question since oil purchases can be settled in other currencies. So then what’s left. Does is become a currency backed by military force? How does that work? In any event, a currency is either purely fiat or backed by something. I’m trying to figure out the most likely way the lifespan of the dollar ends.

In any event, there can be no question that the “value” of our dollar is on a downhill slide. Then that means that we’d be better off converting what excess dollars we hold into stuff. Is that “stuff” precious metals? Real estate? Guns and ammo? All of the above?

Submitted by Tyler Durden on 08/23/2015 – 14:00Economics is dead, and economists killed it. What we have seen over the course of the last eighty years is a systematic dismantling of the contribution of economics to our understanding of the social world. But apparently what is dead can be killed again.

Submitted by Tyler Durden on 08/23/2015 – 12:00As the capital markets from Shanghai to New York were melting down in ways hearkening back to the early days of the prior financial crisis – a period of time many would like to forget (or act) as if it never happened – the Nobel Laureate economist Paul Krugman decided it was time once again to weigh in with what will surely be viewed by the so-called “smart crowd” as a brilliant perspective on what ails the world: Not enough debt. He came out blazing with what seems the only bullet in his arsenal as a cure-all for what ever the ailment might be (e.g., debt.) as he argues this view in his latest: Debt Is Good.

Submitted by Tyler Durden on 08/23/2015 – 11:20Following the end of a horrible week for petroleum importers (not to mention shale producers) despite WTI briefly dipping under $40 (wasn’t this supposed to be great news for the US economy?) we have the start of a just as ugly week for the Persian Gulf oil exporters, whose Sunday market open can be described as a continuation of last week’s broad risk carnage, and where Saudi Arabia, until recently the region’s best performing market, is now down 10% for the year and down 30% compared to 12 months ago.

Submitted by Tyler Durden on 08/23/2015 – 10:13Over the weeks, months, and years ahead we’ll begin to understand more about the fallout from the death of the petrodollar and nowhere is it likely to be more apparent than in Saudi Arabia where widening fiscal and current account deficits have forced the Saudis to tap the bond market to mitigate the FX drawdown that’s fueling speculation about the viability of the dollar peg. As Bloomberg reports, the current situation mirrors a “very scary moment” in Saudi Arabia’s history.

Submitted by Tyler Durden on 08/23/2015 – 09:59Last week, in the global currency war’s latest escalation, Kazakhstan instituted a free float for the tenge causing the currency to immediately plunge by some 25%. The rationale behind the move was clear enough. What might not be as clear is howrecent events in developing economy FX markets stem from a seismic shift we began discussing late last year – namely, the death of the petrodollar system which has served to underwrite decades of dollar dominance and was, until recently, a fixture of the post-war global economic order.

Submitted by Tyler Durden on 08/23/2015 – 09:18In the aftermath of China’s worst manufacturing PMI since the financial crisis, which in turn sent the Shanghai Composite crashing to the “hard floor” level of 3500, below which the PBOC and Beijing officially are seen as having lost control, virtually every China expert and strategist rushed to defend China’s policymakers (and its stock market) with predictions that an RRR cut as large as 100 bps is imminent, and would take place as soon as this weekend, a much-needed move to calm nerves that China is in control. it did not.

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

07/29/2015 – 18:15

Why are governments suddenly so keen to ban physical cash? The answer appears to be that the banks and government authorities are anticipating bail-ins, steeply negative interest rates and hefty fees on cash, and they want to close any opening regular depositors might have to escape these forms of officially sanctioned theft. The escape mechanism from bail-ins and fees on cash deposits is physical cash, and hence the sudden flurry of calls to eliminate cash as a relic of a bygone age — that is, an age when commoners had some way to safeguard their money from bail-ins and bankers’ control.

“How would US Treasury bulls in the private sector react if they knew in advance that the second largest owner of Treasuries, the PBOC, was a forced seller of Treasuries. Such compelled selling would be obvious before US markets opened each morning as downward pressure on the RMB exchange rate in Asia forced the PBOC to liquidate foreign currency assets to defend the fixed exchange rate. Would even Treasury bulls stand in the way of such a large and predictable liquidation? If they didn’t then the second phase of The Great Reset would come to pass and the decline of EM external deficits would force tighter monetary policy in both EM and DM.”

Governments move toward ever greater financial repression – Repression includes suppression of rates, capital controls, outlawing of cash and bail-ins– Finance ministers discuss cashless society, giving banks total control over public’s money– Bail-in legislation is at advanced stage internationally– Bail-ins coming to indebted western nations – question is when …– Legislation is devised to protect larger banks– Ramifications of bail-ins have not been thought through– Bail-ins will be destructive and may contribute to deflationary collapse– Diversification both in asset classes and geographical diversification essential

“China is not doing anything that the US has not already tried,” exclaims Rick Santelli as he derides the ‘entitlement’ society that has reached the investor class. Whether it’s US, Japan, Europe, or China, “the idea of trying to prop up returns in the equity market – admitted or not – is going on,” Santelli notes, asking – after forcing every mom and pop out of savings and into investment, “if it doesn’t turn out well… do they have a moral obligation to help out?” Simply put, he rages – drawing the chart of the year – “the central planners are in control… and I don’t suspect they will give up the reins any time soon.”

Growth of Chinese Margin Accounts Drove Bubble – Now Drives the Crash

– Restrictions on borrowing to speculate were eased in 2010– Middle class savers gradually saturated the market trading on leverage– Market crash began as government tried to reign in leverage in overheated markets– Leverage amplified gains on the up-leg, amplifies losses on down-leg forcing further sell offs– Policy u-turns could not halt crash

China’s Market Rout Is a Double Threat

Chinese investors in Beijing on Friday. Roughly $2.7 trillion worth of value has evaporated since the Chinese stock market peaked on June 12.CreditEuropean Pressphoto Agency

HONG KONG — For nearly three years, President Xi Jinping of China has crushed opposition by silencing and often locking up anyone who dares defy the government. But that aura of invincibility has been shaken by stock market speculators who have made a mockery of efforts to halt a steep slide in share prices.

The losses — Chinese shares have shed more than a quarter of their value in three weeks — pose an added risk, and possibly greater danger, to a global economy grappling with Greece’s difficulties in repaying foreign loans and its possible exit from the euro. About $2.7 trillion in value has evaporated since the Chinese stock market peaked on June 12. That is six times Greece’s entire foreign debt, or 11 years of Greece’s economic output.

Skeptical investors have so far shrugged off each step the government has taken to keep share prices aloft: an interest rate cut, threats to punish rumormongers, allowing the national pension fund to buy stocks and even plans to investigate short-sellers who have placed bets that the market will fall. The faltering of these measures has put an embarrassing dent in the halo of unruffled supremacy built up around Mr. Xi’s administration, and this weekend his government doubled down again, betting that it could beat bearish market sentiment into submission.

It’s simple, the euro is finished. It won’t survive the unmitigated scandal that Greece has become. Greece is not the victim of its own profligacy, it’s the victim of a structure that makes it possible to unload the losses of the big countries’ failing financial systems onto the shoulders of the smaller. There’s no way Greece could win. The damned lies and liars and statistics that come with all this are merely the cherry on the euro cake. It’s done. Stick a fork in it. The smaller, poorer, countries in the eurozone need to get out while they can, and as fast as they can, or they will find themselves saddled with ever more losses of the richer nations as the euro falls apart. The structure guarantees it.

The Single Biggest Driver For Stocks Is Collapsing

The markets are primed for a very serious correction… possibly even a Crash.

Earnings are what drive stocks. Investors sometimes forget this during periods of speculative manias such as the one we’re experiencing today. But the reality is that there is no rational reason to buy a stock (company) other than to share it its profits via Earnings or Dividends.

With that in mind, consider that Earnings and Sales are both rolling over sharply. The below chart from Societe General illustrates this point nicely. Also note that we are rapidly approaching a period in which Year over Year changes in both metrics are negative.

Moreover, this is occurring at a time in which stocks have rallied far higher than earnings warranted.

Earnings Per Share or EPS leads stock prices as the below chart shows. Note the large divergence that occurred in 2007 at a time when EPS rolled over (EPS is the blue lines). We all know what came after this (2008).

Now look at the massive divergence occurring today (the right black square). It makes the 2007 divergence look small by comparison!

Stocks are more stretched than at any point in the last 10 years. At the very least we should see a 10-15% correction if not an outright Crash in the coming months.

And yet, 99% of investors will ignore the clear warnings today… just as 99% ignored the warnings in 2007 and 1999.

Smart investors should take note of this now. It is a MAJOR red flag to be watched closely.

#41 and counting dead bankers in last 18 months….

Goldman Sachs Rookie Analyst Almost Escaped Before Falling To His Death

From the early days of Zero Hedge in 2009 to Matt Taibbi’s 2010 critique, “The Great American Bubble Machine,” Goldman Sachs has been one of the all-time favorite punching bags in critical circles. It’s easy to imagine Tyler Durden in a Fight Club style brawl with Lloyd Blankfein, taunting him, “No bailouts this time.”

Taibbi called Goldman “a great vampire squid wrapped around the face of humanity.” This time, their victim was Sarvshreshth Gupta, a rookie analyst just 22 years old from the University of Pennsylvania. Gupta was found dead in a parking lot next to his apartment building on the corner of Sacramento Street and Brooklyn Place in San Francisco. He apparently fell from the building.

After working 100 hours a week, he told his father, “This job is not for me.” In March, he quit.However, like the crazy woman in Fatal Attraction, Goldman was not going to be ignored. A week later, Goldman urged him to reconsider. His father encouraged him to return, and he did. Gupta was put on a reduced schedule (does 70 hours qualify as reduced?)

However, it was just a ruse, and Gupta was back up to 100 hours again soon enough. On April 16 at 2:40 a.m., he called his father again, “It is too much. I have not slept for two days.” This time, his father told him to quit. Gupta said he would leave the office soon. Several hours later, he was found dead in the parking lot. Goldman strikes again.

Just six weeks later, Thomas Hughes, an associate at investment bank Moelis & Co., jumped off his luxury apartment building in Manhattan. Witness Mario Mroczkowski said that Thomas was decapitated after hitting a guard rail.

All of this reminds me of another story two years ago. Moritz Erhardt was a 21-year-old intern at Merrill Lynch. After working all night for 3 days in a row, he collapsed in the shower and died.

Bankers have become the modern day chimney sweepers as far as physical health is concerned. Yes, they are well-paid, but it’s hard to enjoy your money when you’re at the office all night or when you’re dead. Even the financial career website “e-financial-careers” published an article called “How banking can ruin your body and mind.” When a large career network releases the financial equivalent of the surgeon general’s warning, that should catch your attention.

According to Tim Bean, a trainer who works with bankers at Lloyds, 51% of men working in the City who are over 40 years old have erectile dysfunction. From caffeine to alcohol to cocaine, the banker’s body is a pharmaceutical playground.

Michel studied two departments at two investment banks (one comprising corporate financiers, the other salespeople and traders) and conducted hundreds of interviews. She eventually concluded that bankers go through a cycle of bodily abuse until they either drop out or take control.

One to three years: Abuse

In the first 1-3 years of a banking career, Michel discovered that bankers tend to repress their bodies. During this period, they work hard regardless of exhaustion/broken legs/eating disorders/alopecia and do whatever is required to get the job done. Michel came across one female banker in this phase who had fallen and broken her leg in two places on the way to a meeting. Although it changed colour and was painful, the banker ignored the symptoms until her meeting was over.

Four to six years: Breakdown

After 4 years in a banking career, Michel said bankers’ bodies start fighting back. “Bankers developed embarrassing tics, such as nail biting, nose picking, or hair twirling,” she discovered, adding that the bankers she studied, ‘shopped, partied and consumed pornography’ to combat numbness, achieve control and escape. At this stage, however, the previous years of bodily abuse start to become an issue. “It is an ongoing battle. My body caves in one way and I find another way around it'” one banker told Michel.

Six years plus: Care and attention

Bankers who make it through the body-meltdown phase were compelled to start taking note of their physical limitations and to start looking after themselves, said Michel. Interestingly, she suggested that this applied most effectively to bankers who’d spent six years or more working for a single firm: “Bankers had to be socialized before they could distance themselves.”

One solution is to avoid banking entirely. Gupta had the right idea, but the Goldman Sachs vampire squid sucked him back into the office. In a world where corporations have rigged the job market, college graduates can’t find work, and machines are taking over nearly every job, Gupta was just trying to survive by taking one of the few opportunities left in the post-crash world.

Submitted by Tyler Durden on 06/03/2015 – 10:19Two years ago, bank analyst Mike Mayo asked JPM chief Jamie Dimon a simple question: why should affluent customers not pick UBS over JPM due to a mismatch in capital ratios, to which Dimon’s response was even simpler: “that’s why I’m richer than you.” To which we then added: “No logic, no rationale: all about the bottom line, which to Jamie at least is all that matters. The bottom line was indeed all, because as Bloomberg calculated overnight, over the past several years, Jamie Dimon quietly became not just “richer than you”, but “much” richer: his net worth is now well over $1 billion!

Most investors have heard Kyle Bass’ rather eloquent phrase, “buying gold is just buying a put against the idiocy of the political cycle. It’s that simple.” However,what few may remember was his warnings in 2011, suggesting the University of Texas Investment Management Co. take delivery of its gold – as opposed to trusting it in the ‘safe’ hands of COMEX massively levered paper warehouse. Now, as The Star Telegram reports, Texas is going one step further with State Rep. Giovanni Capriglione asking the Legislature to create a Texas Bullion Depository, where Texas could store its gold. The goal is to create a secure facility that would allow the state to bring home more than $1 billion in gold bars that are owned by UTIMCO and are now housed at HSBC in New York.

Here’s how ‘the cartel’ rigged the currency market

U.S. Attorney General Loretta Lynch delivers remarks on charges filed against banks for colluding to manipulate foreign exchange rates.

IF VANGUARD BELIEVES….YOU BETTER BELIEVE

Looking for signs that the country’s largest asset management firms believe a market meltdown may be on the horizon? Look no further than Vanguard and several other large ETF providers who have set up billions in credit lines with banks to guard against the possibility that a wave of redemptions could wreak havoc on illiquid credit markets.

Submitted by Tyler Durden on 04/27/2015 – 16:37We are paying a high price for too many elites and their ‘frivolous cravings’. Nowadays many countries’ social and political structure relies on debt-driven consumption and increasing levels of entitlements. Blame the policy-makers as the “permanent lie [has become] the only safe form of existence.”

BEIJING — U.S. global dominance will gradually weaken and eurocentric standards in international norms will increasingly give way to pluralist standards. The decline of global organizations and the rise of regional ones will take place simultaneously.

The endgame has indeed arrived. At the very least, the international elites seem to think success is within their grasp, for they now openly expose their own criminality. But they do so in a way that attempts to divert blame or to rationalize their actions as being for the “greater good.” All signs and evidence point to what the IMF calls the “great global economic reset.”” The plans for this reset do not include U.S. prosperity or a thriving dollar.

Centrally issued money centralizes wealth and generates systemic inequality.This is equally true of all centrally issued currencies. But the inequity that is intrinsic to this system is politically, socially and financially destabilizing, and so this system is unsustainable.

A major shift in global power has been slowly developing over the past 18 months and is now coming to fruition as China puts the finishing touches on the new Asian Infrastructure Investment Bank (AIIB). The AIIB is a direct rival to the post-World War II world order principally the World Bank.

China has been able to successfully get countries across the world to sign on the bank even key American allies including France, Germany, and the United Kingdom. The United States has been joined by Japan and Colombia in holding off on even applying for membership.

The shift of power east is causing concern throughout the US establishment perhaps most pronounced from former Treasury Secretary and Wall Street consultant Larry Summers who painted the growing membership of AIIB in apocalyptic colors.

This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the US before, and times when American behaviour was hardly multilateralist, such as the 1971 Nixon shock, ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of it.

This failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics. With China’s economic size rivalling America’s and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the US have rendered it increasingly dysfunctional.

Summers blames US political divisions as well as the decentralized aspects of federalism for the US decline in power saying both the right and left have stymied expansion of World Bank and IMF power by not supporting the adoption of its rules at home and that federalism creates too many different authorities for international investors to deal with.

Summers also offered, ironically given his own history, that the “global agenda” offered by the Western system relies too much on “elite concerns” to the exclusion of the “working class.” No kidding? Wait until he finds out about this guy Larry Summers.

In any case, the empowerment of the Western financial and business elite has led to little benefits for workers in the West over the previous generation. A little diminishment of power by a rebalancing of the global economy could even help workers in the West by forcing multinational firms to stay more anchored in their home territory and, whilst being trapped, force them to distribute gains more equitable…

CHINA GLOATS

Blackmail. Extortion. Intimidation. This isn’t the behavior of a trusted friend. It’s the behavior of an arrogant sociopath.

And the rest of the world is sick of it.

Other countries—even allied nations—see that times are changing. There are new players on the rise, and the US isn’t the only option anymore.

Increasingly they’re turning to China, who, by some metrics, is already the largest economy in the world.

And the US government can’t do anything about it.

This is happening now with increasing speed. It’s mainstream news everywhere: the US is being shunned by its allies for the new kid on the block.

De-Dollarization Accelerates As More Of Washington’s “Allies” Defect To China-Led Bank

The global de-dollarization trend continues as it appears the UK’s move to join the China-led Asian Infrastructure Development Bank has indeed shown other US “allies” that spurning Washington’s advice is actually acceptable and concerns about the institution’s “standards” may simply be a diversion aimed at undermining China’s attempt to exercise more influence in its own backyard. Here’s more from theNY Times:

Ignoring direct pleas from the Obama administration, Europe’s biggest economies have declared their desire to become founding members of a new Chinese-led Asian investment bank that the United States views as a rival to the World Bank and other institutions set up at the height of American power after World War II.

The announcement on Tuesday by Germany, France and Italy that they would follow Britain and join the Chinese-led venture delivered a stinging rebuke to Washington from some of its closest allies. It also called into question whether the World Bank and the International Monetary Fund, which grew out of a multination conference in Bretton Woods, N.H., in 1944 and established an economic pecking order that lasted 70 years, will find their influence diminished.

The announcement by Germany, Europe’s largest economy, came only six days after Secretary of State John Kerry asked his German counterpart, Frank Walter-Steinmeier, to resist the Chinese overtures until the Chinese agreed to a number of conditions about transparency and governing of the new entity. But Germany came to the same conclusion that Britain did: China is such a large export and investment market for it that it cannot afford to stay on the sidelines.

South Korea, another US ally that the Obama administration has not-so-subtly lobbied to stay out of the AIIB for the time being, is reportedly reconsidering a bid to join and although reports that Seoul had already committed to the venture appear to have been a bit premature, the country will make a decision this month and is expected to discuss specifics this weekend at a meeting with Chinese and Japanese officials. Here’s FT:

The foreign ministers of China, Japan and South Korea will meet in Seoul this weekend for the first time in three years, in an effort to calm tensions in the region.

The trio have strong economic ties but frosty relations. International angst about this state of affairs among the regional superpowers has been further piqued by the Asian Infrastructure Investment Bank, a Chinese-led initiative sparking alarm in Washington and proving divisive elsewhere.

Meanwhile, even Europe’s own “magical fairyland” is taking the plunge. Via Bloomberg:

China welcomes Luxembourg’s application to be a founding member of the Asian Infrastructure Investment Bank, China’s finance ministry says in a statement on website.

And so, with the most European of European countries on the bandwagon, and with South Korea leaning unmistakably towards joining up, we say again:

Bottom line: this isn’t theory or conjecture anymore. Every shred of objective evidence suggests that the dollar’s dominance is coming to an end.

History is very clear what happens with dangerous imbalances like this. They correct painfully. Through class warfare. Through currency crises. Through wealth destruction.

I have no doubt that as the Money Wars escalate and the world’s central banks dial up the printing presses to exponential heights, we will each be confronted with our own unique set of heartaches and problems. The only answer I have for you is to find your own answers. Our own inner truth is there, waiting to be uncovered during our lifetime. I encourage everyone to recognize the unfolding Money Wars as an opportunity to wear new hats and explore new places that just might lead you to a brave new world made by you just for you.

The Chinese Buy Billboards Announcing The Renminbi As “The New World Currency”

When I arrived to Bangkok the other day, coming down the motorway from the airport I saw a huge billboard – and it floored me.

The billboard was from the Bank of China. It said: “RMB: New Choice; The World Currency”

Given that the Bank of China is more than 70% owned by the government of the People’s Republic of China, I find this very significant.

It means that China is literally advertising its currency overseas, and it’s making sure that everyone landing at one of the world’s busiest airports sees it. They know that the future belongs to them and they’re flaunting it.

And it’s true. The renminbi’s importance in global trade and as a reserve currency is increasing exponentially, with renminbi trading hubs popping up all over the world, from Singapore to London to Luxembourg to Frankfurt to Toronto.

Multinational companies such as McDonald’s are now issuing bonds in renminbi, and even sovereign governments are issuing debt denominated in renminbi, including the UK.

Almost every major global player out there, be it governments or major multinationals, is positioning itself for the renminbi to become the dominant reserve currency.

But here’s the thing. Nothing goes up and down in a straight line. And China is in deep trouble right now. The economy is slowing down and the enormous debt bubble is starting to burst.

A lot of people, including the richest man in Asia, are starting to move their money out of the country.

So while the long-term trend is pretty clear – China becoming the dominant economic and financial superpower – the short-term is going to look incredibly rocky.

We talk about this in today’s short podcast with Sovereign Man’s Chief Investment Strategist, Tim Staermose, which includes a few ways to actually make money from China’s short-term unwinding.